Fraser Forum

Health-care spending could consume 47 per cent of Alberta’s budget by 2030

Printer-friendly version

Since 1998, health-care spending in Alberta has increased by 317.1 per cent—faster than in any other Canadian province—outpacing population growth, inflation, growth in government spending on other programs, and provincial economic growth. Subsequently, while health-care spending consumed 34.1 per cent of the province’s budget in 1998, it ended up consuming 42 per cent of total program spending in 2015.

This rapid growth in health-care spending has contributed significantly to the development of the fiscal challenges now facing Alberta, which is expecting to run a $10.4 billion deficit this year and to rack up tens of billions of dollars in debt over the next five years.

Based on historical health spending trends, and expectations regarding inflation and a growing and aging population, a new study estimates that health-care spending could consume 47 per cent of the province’s budget by 2030. Further, health-care spending as a share of provincial GDP is projected to grow from 5.9 per cent in 2015 to 10.4 per cent by 2030.

These numbers suggest that rising health-care costs will make it harder for the provincial government to balance future budgets and find money for other priorities such as education and infrastructure. At the same time, the historically high wait times for medically necessary treatment in the province suggest that (despite high levels of spending) the province is struggling to meet the health care needs of patients.

While the provincial government’s first step towards repairing the provinces finances should be to slam on the brakes and rein in spending, it is also a good opportunity to consider meaningful policy reform across Canada more generally.

Other countries with successful universal health-care systems have repeatedly demonstrated how a high-performing system (with low wait times for treatment) can be achieved at similar (or lower costs) than the amount Canada spends on health care (as a share of its economy). However, most of them do universal health care differently—generally embracing the private sector as a partner or alternative (expanding capacity and stimulating competition), and expecting patients to share in the costs of their treatment (with annual caps and exemptions for vulnerable populations).

While sweeping reform would undoubtedly benefit Albertans, the province could also generate important benefits through smaller steps to at least ensure it receives better value for the large amounts of money it spends on health care. For example, following the approach of the successful Saskatchewan Surgical Initiative (SSI) by introducing a pooled referral system and further contracting out of select day surgeries to private clinics to potentially help lower wait times while also potentially cutting costs per procedure.

Alberta faces significant fiscal challenges, and a major reason for those challenges is the rapid growth in healthcare spending. Unless the province takes action to address the rising cost of Alberta’s health-care system it will be exceedingly difficult to get the province’s fiscal house back in order.

Subscribe to the Fraser Institute

Get the latest news from the Fraser Institute on the latest research studies, news and events.